Apache, Chevron Kitimat LNG Joint Venture Is Under Way

On Monday, Apache Corp. and Chevronannounced that their joint venture to develop the Kitimat liquefied natural gas (LNG) project is up and running. This means, among other things, that former stakeholders Encana and EOG Resources, which previously owned 30% stakes in the LNG plant and Pacific Trail Pipelines, have now officially sold their stakes and exited the JV.

According to a press release from Apache, its net proceeds from the restructuring of the JV with new ownership wound up being $405 million; in December it had put the total at approximately $400 million.

This JV, which was described in a December announcement by the companies, now consists of the Canadian subsidiaries of both Apache and Chevron each owning a 50% interest in the Kitimat LNG plant, the Pacific Trail Pipelines, and 644,000 gross undeveloped acres underlain by gas-bearing shale in the Horn River and Liard basins. A "brief" transition period is under way, after which the companies intend to divide up responsibilities for the project thusly:

Chevron Canada will operate the LNG plant and the pipeline.

Apache Canada will operate the "upstream assets" (i.e. the land that will be drilled for gas).

Kitimat LNG on the northern British Columbia coast in Canada, is completing front-end engineering and design, and early site work is under way. Current plans call for two liquefaction trains, each with expected capacity of 5 million tons of LNG per annum (about 750 million cubic feet of gas per day). According to the companies, Kitimat LNG has received all significant environmental approvals and a 20-year export license from the Canadian federal government.